Article 1  Investment in this Law denotes only direct investment of foreign capital made in accordance with or based upon the provision of this Law for the purpose of carrying on the enterprise in Indonesia, with the understanding that the owner of the capital directly bears the risk of the investment.

Article 2  Foreign investment in this Law means:
a. foreign exchange that does not form a part of the foreign exchange resources of Indonesia, and which with the approval of the Government is utilized to finance an enterprise in Indonesia.
b. equipment for an enterprise, including rights to technological development and materials imported into Indonesia, provided the said equipment is not financed from Indonesian foreign exchange resources.
c. that part of the profits which in accordance with this Law is permitted to be transferred, but instead is utilized to finance an enterprise in Indonesia.

FIELDS OF ACTIVITY FOR FOREIGN INVESTMENT

Article 5(1)  The government shall determine the fields of activity open to foreign investment, according to an order of priority, and shall decide upon the conditions to be met by the investor of foreign capital in each such field.
(2) The order of priority shall be determined whenever the Government prepares medium and long-terms development plans, taking into consideration developments in the economy and technology.

Article 6(1)  Fields of activity, which are closed to foreign investment exercising full control, are those of importance to the country and in which the lives of a great deal of people are involved, such as the following. a. harbors; b. production, transmission and distribution of electric power for the public; c. shipping; d. telecommunications; e. aviation; f. drinking water; g. public railways; h. development of atomic energy; i. mass media.
(2) Industries performing a vital function in national defense, among others, the productions of arms, ammunition, explosive, and war equipment, are absolutely prohibited to foreign investment.

Article 7  In addition to those mentioned in Article 6 Section (1), the Government may determine certain fields of activity in which foreign capital may no longer be invested.

Article 8(1)  Foreign investment in the field of mining shall be carried out in cooperation with the Government on the basis of a Working Contract (Kontrak Karya) or other from in accordance with prevailing regulations.
(2) The system of cooperation on the basis of working contract or other form can be implemented in other field of activity which will be determined by the Government.